Court affirms PBM transparency rules

April 8, 2007

ALEXANDRIA, Va. —Independent pharmacy operators and the managed care industry are again at loggerheads, this time over a potentially far-reaching decision last month by U.S. District Court Judge Ricardo Urbina to uphold a District of Columbia law requiring pharmacy benefit managers to disclose payments received from drug manufacturers.

Urbina ruled March 6 that Title II of the District’s “AccessRx Act of 2004” could stand. The law requires PBMs to disclose the amount of rebates they receive from drug manufacturers for steering patients to ‘preferred’ drugs, and to pass on any payments that they receive from a drug manufacturer. The law also provides that PBM conflicts of interest must be disclosed.

Predictably, the National Community Pharmacists Association reacted gleefully to the ruling, while the Pharmaceutical Care Management Association said it would immediately appeal the decision on behalf of its PBM members.

“Regrettably…the [court] declined to conduct a substantive review of the merits of the case and simply accepted the First Circuit’s holding in PCMA v. Rowe,” noted the PBM industry group. “Since 2003, 30 states have rejected imposing similar fiduciary-disclosure requirements on pharmacy benefit managers because they know these proposals empower drug makers to charge consumers and employers higher drug prices.”

By contrast, the NCPA called Urbina’s ruling a needed check on a business that the independent pharmacy organization asserts is frequently at odds with traditional fiduciary restraints.

“It’s those sorts of kickbacks and obvious conflicts of interests that have resulted in investigations, lawsuits, and reform legislation targeting unscrupulous PBM business practices,” asserted Bruce Roberts, NCPA’s executive vice president and chief executive officer. “These sorts of ‘transparency’ statutes protect both employers that provide drug benefits for employees and retirees, as well as consumers themselves, who pay the premiums.”

NCPA noted that eight states and the District of Columbia have enacted similar laws reforming PBM business practices, and that PBM reform bills have been introduced in more than 10 additional states this year. A spokesman for the group also pointed out that the House Committee on Oversight and Government Reform asked PCMA and the PBM industry in February to disclose drug pricing information as part of a congressional investigation into fraud, waste, and abuse on drug pricing for federal drug programs.

“If PBMs expect to participate in public prescription drug plans, they owe a fiduciary responsibility to patients and taxpayers—not just to their shareholders,” said NCPA president John Tilley, a pharmacy owner from Downey, Calif. “The business model for the giant PBMs is subterfuge, false claims, and kickbacks—and has nothing to do with the health and well-being of patients.”

Tilley’s assertion stands in stark contrast to the PCMA’s position. “Numerous, independent data from the Congressional Budget Office, the Federal Trade Commission, and others have concluded that public disclosure of drug-pricing information alone could increase prescription-drug costs by about 10 percent,” the group countered. “As this process continues, PCMA will continue to work with consumer and employer allies to make policymakers fully aware of the harmful consequences associated with PBM fiduciary-disclosure proposals.”

The group’s efforts appear to be paying off. Leslie Norwalk, acting administrator of the Centers for Medicare and Medicaid Services, recently told the House Oversight and Government Reform Committee that public disclosure of negotiated price concessions that PBMs receive from drug manufacturers would “reduce the ability of pharmacy benefit managers and plans to negotiate significant discounts” on behalf of patients enrolled in the Medicare Part D drug benefit program.